EUR/GBP Technical Analysis: Pair Edging Lower From Resistance
- EUR/GBP trading lower after forming a “bearish engulfing” pattern on resistance
- Focus shifts to 0.8250 for possible support on continued weakness
- Key event risk could amplify volatility for the pair
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The pair saw the pattern materialize around the major resistance we highlighted in the last reports, which might now indicate that focus could be put on the 0.8250 level for possible support.
With that said, given the fact that long holders from the 0.8250 level may not achieve new highs (if the pair does indeed continue to move lower), this might imply that participants could hold back for more favorable prices, perhaps eyeing the zone below 0.81 to the 0.80 level, which also coincides with possible long term trend line support and the 0.382 Fib of the daily up move (as measured from the November 2015 lows), for possible reemergence of the uptrend.
Upside conviction on the other hand might need to see a break above the 0.85 figure and the trend line resistance which could signal strong bullish intentions.
A break higher may expose the “post-Brexit” high around the 0.8626 figure before a potential area of resistance from 2013 above the round 0.87 number.
With the BoE rate decision later today, volatility seems likely to pick up for more decisive moves from the EUR/GBP.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 37.9% of traders are long the EUR/GBP at the time of writing. The SSI is mainly used as a contrarian indicator, implying a long bias.
You can find more info about the DailyFX SSI indicator here.
EUR/GBP Daily Chart: August 4, 2016
--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail firstname.lastname@example.org
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.